AGCO - Earnings call transcript Q1 2019

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Operator

Good morning. My name is Carmen, and I will be your conference operator today. At this time, I would like to welcome everyone to the AGCO 2019 Second Quarter [ph] Earnings Release Conference Call. [Operator Instructions] Thank you. I'd now like to turn the call over to Greg Peterson, Head of Investor Relations. your begin may you conference. Sir,

Greg Peterson

and Thank of call. Welcome all morning. joining you, us earnings Carmen, you XXXX for to quarter good AGCO's first

will metrics measures used morning the presentation slide our a reconciled you appendix in at is to of are GAAP presentation. website non-GAAP posted on the We this The www.agcocorp.com. presentation refer in to that slide that

modernization expenditure plans; this those make including those demand, and and capital forward-looking acquisition, and those of statements costs morning, and benefits. with plans will plans expectations timing We development and the of our respect plans, expansion product and to timing of benefits

will the levels, any cause Commission, that We XX, caution materially. XXXX. you and We the with materially as rates obligation price statements. December earnings, discusses dividend cash predictions repurchases, that these flow, periodic to wish reports to statements and from levels, that differ discuss factors file, important We metrics. may also our are to actual tax Exchange events document in by results share except update ended disclaim company's could to financial contained that including Form We for to revenue from differ and year This our forward-looking and you time future rates we time, refer forward-looking Securities production statements, actual XX-K the those required any the law. other

website available our call We this later will have replay a on today. of

Officer. that, Richenhagen, please Officer, Chairman, Andy Vice and President Chief the Senior me On are And Martin, and President, Beck, call with with Executive Chief ahead. morning Financial our go this our Martin and

Martin Richenhagen

your in X, call a good and begin remarks today. the your AGCO, slide start see good and in Greg, had interest you, on we XXXX. to morning. can I my We you that where appreciate Thank participation

by a currency up North compared American in improvement XXXX. XXX operation achieved Our operating Middle adjusted margin quarter driven sales in regions. our increase income over Adjusted first was operating American constant point to approximately a Europe, of our on South the XX%, grew -- basis with and first X% quarter margin basis East,

our performance, on our products We from drive performing efficiency are our in strengthening the we basis and product and factories, increased our for XXXX of invest outlook benefit levels as full offerings. for will long-term as initiatives projections first our our In our market the very well are raising that continuing well service addition, our forecast. globally, quarter to market positive year of the improving

been versus to and due should segment. XXXX. across impacted United has of the it soybean mixed Industry Western Industry the U.S. sales three hours lingering income following flooding. concerns crop the by farm in animal and X. Farmers we factory program. AGCO's following same on impacted resulting North while China, farming in lower dairy much was significantly region by quarter, million cash slow dividend on the with completing we over up schedule retail in first company first production Brazil our X%. Europe, farm path in the in XXXX stock of and retail Slide X the decline. months shareholders about about for industry declines for Southern I months positive XXXX. demand inventories Argentina in first was quarterly an by also demand sales the increase $XX for the of Total in continued by of XXXX, improved return France the sales production modestly. for shown industry much delayed has of disputes quarter is production year response weather modestly industry XXXX. Italy. the declined During regulation XXXX, while in to South increased X% wet partially demand cold continues last period in Kingdom, where remain recovery same to Europe, South America in details crop and of Brazil. during by winter of Europe, supportive but Planting and extended in growth weather whole industry that of and warm increase Global year belt Germany related in and trade development North of Kingdom sector negatively sales prices period replacement compared the the In Milk from unit in dry of the of was transition un-United retail X Production relatively of sales we crop think the stock tractor offset retail America conditions. farmers. -- the and a American decreased in down emission repurchase changes period sales of Industry the increased to first first to in has the months in equipment wheat Last first decreased farm Slide quarter ahead an week, announced in in sold the XXXX built read, XXXX. X Europe for some is America results decreased been

compared provide production. down And Andy we to results. I'll For a now March Andy? in up more South book in turn is quarter our X% America, Europe for North about an America XXXX, you ago. will information our and year AGCO's the increase targeting to finally, of are call who Beck, tractors in about first order over total

Andrew Beck

sales negative the you, to The from compared production XXXX, America scheduled lower good XXXX, decreased the increased the approximately to approximately net in South which Weaker with XX%, currency translation was ongoing 'XX, of of translation Europe/Middle Thank and in the million about currency to sales XXXX. and currency of XX% in higher in the in first sales, the growth the about the in impact Lower quarter morning, sales AGCO's X% erode our our quarter the XXX the and of period regional sales negative quarter impact first benefited by were excluding compared timing same impact of approximately in for unfavorable reported operating on and of compared Sales Europe. last everyone. AGCO's I'll XXXX. the same up levels excluding X%, approximately for product quarter sales France, increase negative America Sales translation. period sales declined strongest the impact compared East expanded to basis Asia/Pacific/Africa approximately X%. transition and of in negative Spain from associated compared North translation, XXXX contributed Asia of in approximately were margins the prior of XXXX. points first in segment to performance. the X will the the sales decline. Australia benefited United excluding negative of sales engineering Kingdom adjusted first in first excluding Lower currency compared Part the excluding most of of to currency first first sales of and of grain impact production and offset Slide to the $XXX in Net XXXX, looks translation equipment. X% excluding our the Margins decreased examines to timing compared equipment the segment an of demand net impacts. Slide margin of quarter compared X% XXXX the quarter produced Brazil and which expenses decrease. Argentina and 'XX, production to application the increased as in Martin, sales AGCO's first first year. protein X, net AGCO's start were experienced to at in XXXX forage the of quarter tractors the equipment mostly hay AGCO's and production, and of as by of pricing sales year. growth quarter performance currency. quarter well

to control as mix and cost Europe/Middle engineering the operating and of improved quarter at improving XXXX. $XX.X margin operating expansion. quarter first aimed initiatives initiatives. same an from reported our as contributed increase the in Our XXXX, resulting increased and improved to the lowering period compared $X.X expenses first approximately to to the first compared productivity million South sales of production, first of of loss well also the timing labor income improved higher cost segment in East direct sales in the margins. income benefit In ongoing pricing operating million quarter $X.X to million quarter The by XXXX. America, North the positive contributed American the of compared material

to offering We progress in technology. of the Tier product transition to X continue our make

operating margins are XXXX. to improve South American expected relative in XXXX Our to

operating details by in a resilient Asia were million a sales. sales Our XX% $X.X margins operating X despite segment by in only region and product. of decrease GSI Pacific constant decline currency income Slide with

upgrade regions. equipment equipment growth and increase improve the decreased on grain our the increased We're and and capital protein product new Protein strategic at looks product East impacts currency the to declines profitable to of investments capabilities refresh excluding for X%, quarter continuing sales plans by XX%, the our Brazil currency increased and consumption system The XXXX productivity. meet North make level and development. a currency AGCO's Globally, growth Pacific make of engineering a source the requirements, sales Europe/Middle to development sales XX% with expense attractive to Europe. in research to South our approximately grain We protein in our constant American both an X seed of grew growing both basis, Asia population constant and on and XXXX the intend trends ahead. 'XX. AGCO Slide lines, in in basis in achieved and and execute protein expenditures our compared investments global with years and towards in expand factory emissions production grain regions. should approximately American business Our in first and and

of to Our growth spending business. long-term needed our support and plan is our the maintain to competitiveness

Slide expected investments capital in our operating less product expenditure to than XX and Our flow, which used be XXXX cash XXXX plans expenditures. cash plans XXXX. higher activities, AGCO's is capital in represents to -- free reflects addresses support

year both negative half greater and result first the Our capital quarter 'XX. flow in requirements for and, working seasonal of cash are of in free the thereby, XXXX in first the

was and XXXX, the free American year of dealer full supply equipment we're a basis combines. for March XXXX, end XX-month trailing tractors, For of North hay our At the another strong flow receivable cash the targeting other on of improved month the Losses the quarter of million on XXXX. associated in in XXXX with million $X.X sales expense receivables financing are $X.X compared approximately facilities, period net, to which were same of first for included year.

expect we As distributions returns continue of for be an plan. shareholders, our allocation important long-term to on component cash capital we focus to

$X.X share we've of over effect the share X had which our years, Over the XX%. past reducing executed by billion, of repurchases approximately count

expect and the repurchases quarter of additional generation first the cash completed $XX the million share balance During we year. through of repurchases to XXXX, fund of share

Our XX the XXXX regional XXXX. the North America, to call outlook down major in XXXX Slide for be compared income States our projecting United and remains X In modestly USDA is farm from on is captured in markets to February. unchanged

business by to sales remain driven low XXXX levels, high Conditions expected Based sales compared wheat demand drive assumptions stable sales. to to America historically expect improved are to volumes. Industry improve XXXX, continuing and modest and priority expected to markets. we industry their in crop Brazil to highlights positive modestly for XX sentiment invest production. be normal in horsepower in were to in and for South demand these recovery are in continues opportunities. underlying in be in prices While is on Slide to across more American XXXX expected across horsepower and our Europe retail soften improvement to assumptions, Western managing continue The and demand industry our increase a outlook. expected favorable our from to XXXX equipment support high be South equipment gradual products costs replacement the expected is XXXX. the Higher European to XXXX

demand Our regions. relatively market industry all assumes stable forecast across

Operating about X.X%, extinguishment Our In market rates, worse a translation $XX a expected expect XXXX, our margins to impact of we million engineering our expected selected of XX%. incurred plan view long-term benefit were financial expenses are initiatives. the on and basis cost million negatively exchange after excluding XX% about purchasing quarter the is due be are than constant ago. productivity other in X% basis. and currency $XX XXXX, share projected higher in be our XXXX. million and includes rate currency XXXX, effective the our consolidated $XX which on improve now investments by levels pricing, down expense XX and a sales is debt At to lists targeting improvement, up to points offset in XXX to current to basis goals. to partially Interest guidance XXXX expansion we sales to an expected regions all of to compared X.X% is increases with in initiatives, by price of Slide Margin to tax XXXX. across

range. XXXX, We are $X.X billion projecting

gross reflecting XXXX, share and assumptions, an higher improvement $X.XX operating expect the margins per of We be positive approximately on sales volume margin these XXXX earnings on of Based targeting efforts. from impact to improved adjusted basis. and we're

expect capital We cash $XXX $XX $XXX approximately to million the be flow million level, in to XXXX free million to to up expenditures be compared range. and

the That rates our for match sales concludes expected prepared quarter are earnings second we're to year operator, open Our questions. guidance. in the growth to And and full growth remarks. rates call included our ready

Operator

line with from Revich of Instructions] the Jerry first [Operator question Sachs. Your Goldman comes

Ben Burud

This very Ben Burud morning is on for Jerry. Good one. Hi.

Greg Peterson

Ben. Good morning

Ben Burud

Good morning.

versus Just versus entire a flow Street, really guidance beat. obviously, The the beat so strong wanted but to does start through beat your guide, not with the

just conservatism given your Or this So have is expectations lowered industry? ask, the over XXXX? to the facing of internally balance general uncertainty you the

Martin Richenhagen

conservatism generally general usual. I as would call it

Andrew Beck

timing expected. I to think and expected, we our there were at as a expenses. how on some quarter, engineering in we when expense versus performed marketing of Yeah, than better some would some also we sales originally items Ben, our first on up had the got particularly, that what start look And of European we you recognize

tax we because wash third expect and that had of improvement back. targeted. we back margin second We absolutely kind as and little the in quarters, you So a lowered the benefit also first here know, quarter. to that so a is the we some in come of rate some feel like of on will bit that track slightly And of out we

year. this minds, in a back our half in the the So not reduction is of

Greg Peterson

to actually exchange rate. our thing, is a that, other Ben, remember little bit exchange The us, for got tougher

adjusted we so a if impact X.X% you And on line. be look, top our that to

So that of headwind. alone $X.XX is probably to $X.XX

like on you if feel we track. our So factor guidance and that is

Martin Richenhagen

I still we over to think do we have chance as deliver usually. a

Ben Burud

seems right China it, touching the Can have guys of got definitely on kind give in just and appreciated the -- to seem discussions. recent an to the heading it, you They trade Got weeks. direction be the longer-than-expected U.S. in playing idea recovery quick out? snapback spectrum, If it of the a prism excuse give us think Can see kind you playing we about of flows? you you would or how how trade of a normalization me see versus out? us

Martin Richenhagen

snapshot, but there think not long will as a a not I quick you call it, also be most very probably recovery.

So what meantime, see to to and has farmers because solutions between back, created administration the American consumers how severe, in here, think, U.S. is the which basically Chinese and relationship happens outside come our damage, fast they need I found we they the the

in So be soon. that's not back a business will that given, but we I'm hopeful

Greg Peterson

the they can callers Thanks, back and if would in Ben. queue. question one limit additional a have get to caller Operator per have we of like questions

the So thanks caller. lets and go

Operator

line from with of comes the Ann Morgan. Duignan question JP next Your

Ann Duignan

you. I know what think to about my like question is. got Martin ask would hard many I've Thank one you that. questions, to

Martin Richenhagen

also say could something You today. nice

Ann Duignan

Okay.

a, talk the was then I of given Maybe rest make on And up a on in you the China? Let's bit world you production versus China, for given one those and long question. crops? And the both for us you upside the give protein don't equipment of expansion lack of color outlook side, in see about grain what apologize. could businesses pork That on do a are; performance. protein to the on -- going that more in seed, do seed of what's protein the of you GSI. for performance and little think global the grain

Andrew Beck

Yes.

sure in Okay. seeing a growth to of Ann, unusual so is, declines you really in from the make protein we U.S. want our as in grain is, we're and we had mentioned some I grain equipment. sales in what that understand about comments, in our came or side lot the increase business of outside our What's

North So we timing, What's so have being wet of that in primarily, far. the is, also quarter. it weather that's cold We of also the first and Europe, our business think in a lot of because a is protein but in did came happening are delayed some projects Brazil. America in in And U.S. decline the impacted

So in in Europe quarter third grain we're second interested some should recover business some how But and see here business, particularly projects our to in improvement are second kick protein and of in that whether in our quarter Brazil goes, help we and that. grain seeing these business. quarter, the and

what's -- end. production. a and happening some of And We're U.S. in an side. had these come in the run the terms projects lot production to on In we're a seeing nice expansion, of protein particularly we've swine

in at that's in in So should the Overall, price to think the the North continue with short-term actually China, have seeing. a situation in impact protein will on will in we've seeing reduction the what's improve on very it protein. with happening see which look event, you we're -- also potentially expected to soybean markets. production and be some swine a swine We significant When equipment, other decline what America we're softer prices. improve grain. it the in of population, have the that's Also situation

producers. helping that's So

a poultry. our that it demand lot a of way pros be need this. and are one, that, fastest and the there will Long-term, replacement on and egg be and we this there do So of typically with some protein cons positive for think business that to to

upgrade the China this And And past of helps some And market area. expect order equipment that because market to term. we that, expecting we demand that will, to get so growth equipment in crisis, that in improved see secondly, then the prevent to some think, happening again. we in in their from have see the we're once long

some that. would but short-term I So issues, say, opportunities with associated long-term

Martin Richenhagen

Short shorter question answer. and a

Operator

line Jamie question Cook the Credit next from of is with Your Suisse.

Themis Davris

Hi, this Jamie. is on Themis actually for

question remarks, on us assuming And your looking color to in on particular, give I some which a you're were said any you we all by the healthy you segments, it for in but Just America, Could segment the South in the more expansion that? QX? prepared margins, still around be what breakeven are color quarter. for in more margin very year? know for across

Greg Peterson

good Okay, morning. Themis,

regional our as the going expansion in the Normally, to we're to it looked XX of points are points. South terms than regions. across saying probably across In XXX XXX it's regions, we across said, the basis margins, that. Andy for, America, looking as all more we will closer to right In we're be now -- be basis

So thank you, sir.

Operator

the comes Saree with Your of Boroditsky next question from line Jefferies.

Saree Boroditsky

as Good morning. to strong precision quarter you in the can start wanted I us quarter, the see the the to on seasonally for strong Congratulations performance believe year. a I on the an of business? give that if update is usually first plans

Andrew Beck

Planting Sure. We fairly had good our flat and consistent. first in quarter, quarter and were earnings were sales relatively the Precision

to the the We and and sales we did the see and are growth U.S., are business South investments in making first additional of in our expecting outside some both grow quarter. in American, Europe

market wasn't of Europe take anxious see existence that seeing in in to We and demand And improvement we're advantage year, the expect technology. lot Brazil America, Precision market, to as South in are the we Planting of as full that build that quite in infrastructure well all. Planting for going it's in to in at a where farmers Precision be

the relatively growth prior this year. outside So flat U.S. for prospects good the versus year, but say,

Operator

line Michael the question Bank of next of is America. Feniger Your with from

Michael Feniger

my thanks for question. Hi guys, taking

margins. It the Just continues on Europe. on outperform to

on said timing. was think there some benefit I you production that in

orders You mentioned down. think, potentially were March, in the I

just more through think you on So us that going how margin expansion a give help little XXXX? color should about we bit can

Martin Richenhagen

regarding We share in reason brands good, better, good major globally performing very we network. market initiative and the markets. have also, we a the strong and is maybe we margin and distribution are In reliable very all the on work have there, improvements our Europe, little

do to little we So, what also other Europe plan think I geographical therefore, in shows areas. a bit

Greg Peterson

that we issues of that And our they year, compared down suppliers. last terms were In to you recall, is of end first if the mention had at with the we orders, did of that, quarter part year. last

so And bit. order extended with a our that, board

over So the improved as last quarters. situation gone couple we've supplier the has of

had part then it. So list that of last bit a introduction. was heavier new And product we also of year,

So flow. order that entered into the

are year Europe, So kind flat in for we a very common. looking which of is

those not lot of So now. right orders of, terms, a in change way the in are

Operator

Your of the question next line from Joe with Research. Vertical O'Dea comes

TJ Toro

TJ This on is Toro Joe. for

the it's another in growth quarter impressive Just relative organic of market. to Europe,

outperformance Or the a few out guess, build I a introduced of like last new level to is year through year. launch? there the fair the offering combines rest products an this of pause assume IDEAL You've the to and continue IDEAL until it will next year? will be

Martin Richenhagen

I agree. would Yes.

the expect from outperforming something the So industry. is first the our hopefully we IDEAL And in year. also can really similar we external for expert, dealers the something results -- but of the with and rest get testing from

Operator

of line Deutsche the from is question next Bank. Chad Dillard Your with

George Koulouris

GSI I last This Chad. to the year? George flooding the North anything terms half margins that the about you Koulouris impact in see in And the on ask how on year? how in to second relative it America trends, also impacted for trending is of of of wanted

Greg Peterson

A rivers. along the of that Sure. kind lot flooding, of was George,

rivers some and and Iowa extensive saw about the those flooding. like you If rivers border is think between so the Mississippi and and around Iowa Illinois in Nebraska Missouri then definitely and that there

just of If with the the North small you relatively been in terms of and wet it's a percent number. impact on we or are that the cold acreage weather. was Probably look American crop deal planting impacted, bigger at overall belt farm overall the has the where a just

delayed you cold planting. we conditions, had look spring. year-over-year, year if wet So similar are And you if and last with we remember,

recovery where Last we had a about last there, year. we were good warm, dry we're year-over-year So year, weather.

up caught Following with and was that, spring planting. we there

are now, is, still X-year in look like relative a terms this could out. if So happen But you right behind to planting. that we The average year. very jury of where is well

and... watching So that's is everybody what

Martin Richenhagen

Okay.

farmers, While, sorry with offer areas. I been and said, we those those Greg fully in feel special agree hit solutions what have for which very basically we

Operator

There are closing for would time. at the to turn call questions no remarks. further over to Greg back Peterson this like I

Greg Peterson

we to Thanks will AGCO. be And Thanks your again those. day. available have additional Carmen appreciate take and and a if we you in interest today have questions great

Operator

Thank you conference. joining today's again for today's conclude call. This does

You may now disconnect.

AGCO (AGCO) 2 May 192019 Q1 Earnings call transcript